Statement By Joshua Kalinoe, Managing Director and CEO of Petromin on Granting Of Declaration of Location [Elk -Antelope]
Let me firstly thank the Prime Minister, Minister for Petroleum & Energy and other Ministers of Government for facilitating Papua New Guinea’s 2nd LNG Project.
Declaration of Location and the extension of the License areas now paves the way for Petromin and the Operator, InterOil to commercialize the project.
The flaring of Antelope 1 on Monday 2nd March, 2009 underpins a first train 3.5 Million Tons per annum capacity plant at an estimated cost of US$5 billion. As we prove up reserves through further exploration drilling we will add another one or two trains.
For Petromin, the State and people of Papua New Guinea this will be our single largest petroleum project where Papa New Guineans will be given the opportunity to be active participants in the whole value chain.
The Board and management of Petromin made the decision to farm-in on the Elk/Antelope project after going through an internal risk assessment process. When we signed the Investment Agreement with InterOil in October last year, our petroleum geologists and reservoir engineers assessed the risk and made the observation that the Elk/Antelope field is less risky and highly prospective and recommended the farm-in arrangement.
This 2nd LNG project for PNG is unique and innovative in many ways. One such innovation is that there is a lot of flexibility on how the project will eventually be structured so that InterOil, can bring in strategic partners to underwrite the LNG project.
Further more, all the high quality condensate will be sold to the InterOil Refinery in Port Moresby, adding more value to the Papua New Guinea economy. The condensate extraction is planned to commence in 2010. So some benefits will accrue to the project partners years before the actual gas is sold as LNG.
The innovative and competitive approach to project financing that we are currently pursuing collectively with InterOil and Pacific LNG will ensure that no State assets will be sold or swapped to finance the State’s equity. In fact Petromin with the support of InterOil and Pacific LNG is working on a financing structure that would ensure that State’s full 20.5% equity in the upstream and 10% in the midstream will not be diluted either directly or indirectly. We are determined to ensure that the State and people of PNG maximize their gains from this project both through the revenue stream as well as through technology transfer.
Petromin and InterOil have forged a very solid long term strategic commercial partnership. In this regard, I am happy to announce that InterOil and its downstream partners have agreed for Petromin to co-market its share of the LNG. This will make Petromin a fully integrated petroleum company in which Papua New Guineans will for the first time be given the opportunity to participate in the full value chain of the LNG business. This is what our political leaders envisaged when Parliament created Petromin in 2007. InterOil has now made it possible for this vision to be realized.
We are determined to promptly deliver the 2nd LNG project to Papua New Guineans on schedule in 2014 and the operator, InterOil has commenced the pre-FEED process, including contractor identification, financing, marketing, landowner study, and environmental study. Work is in advanced stages in putting together the PDL application. We want to thank the Minister for his expeditious actions in Declaring the Location of the gas find and extending the exploration licenses.
We know that the project has the unequivocal support of the Prime Minister and our political leaders, especially members of Cabinet. Accordingly we look forward to the project being given priority consideration as far as regulatory and statutory approvals are concerned. In fact, we a pleased to note that the approval process for the LNG Project Agreement for the liquefaction plant is progressing well. We understand that the Ministerial Gas Committee is given it the fullest attention. We now got the gas, international LNG recognition, and all we need is the LNG Project Agreement to be approved so that we meet the construction deadline.
In conclusion, I am excited about this huge high quality discovery and the prospects it will bring in transforming Petromin into what it was set up to be - a fully integrated national oil and gas company.